A metro Toronto family physician
in solo practice plans to retire in January. The practice
is located in a townhouse near the University of Toronto
only a 10 minute walk from Bay and Bloor. His approximately
2,100 patients are a mix of university staff and their
families, graduate students and financial, publishing
and retail executives who work in the area. He's got a
solid practice in a highly desirable location that should
be worth something, but is it? The answer, in this case,
is, yes. Unlike so many doctors across the country who
find their practices nearly impossible to sell, this doctor
is one of the lucky ones.
Universal healthcare and the decline
in the number of GP/FPs have had a debilitating effect
on practice worth. These days a new physician entering
general practice or one of the high volume specialties
(derm, ENT, IM for example) has little difficulty in
attracting new patients. You don't have to "buy" patients
from an existing practice. The fact is that many practices,
particularly those in areas of the country with the
most severe physician shortages, have little monetary
value beyond the fixtures and furniture. Indeed, physicians
increasingly find they can't even give their patients
away and close their door in frustration and simply
walk away. Not, perhaps, the wisest thing to do primarily
because your responsibility for your patients' medical
records can extend for as long as a decade and abandoning
them invites legal trouble down the line (See "Shutting
down you practice", Vol 1 No 13, page 37).
Despite these systemic roadblocks,
some physicians are able to receive monetary compensation
for the practice they've built up over the years —
though it takes some finessing. This is how it worked
for the Toronto FP. In February of this year he decided
to put the practice townhouse up for sale. The real
estate agent suggested it be listed as a private home
at $1.7 million. The doctor was pleased enough with
the price — he'd paid under $100,000 for the property
in 1976 — but he preferred the idea of selling
it as an operating practice. A realistic evaluation
of his furniture and equipment suggested he could get
perhaps $20,000 for the lot. Surely, he reasoned, he
could do better than that. A prestigious practice in,
what to him, was the best location in the country ought
to demand a premium.
Instead of listing with a local
agent, he decided to try to sell the practice himself
by advertising in a number of US medical journals and
on the internet at www.promed-financial.com/listings/medical.php3.
Rather than calculate a 'goodwill' sum based on a variety
of formulas that US practices use to establish a practice
selling price (where, incidentally, practice prices
have fallen almost as dramatically as they have here,
though for different reasons), he simply described the
practice — and the property — and set the
price at $1.9 million. That was $200,000 above the price
the local real estate company had set for the listing.
The doctor regarded the premium as "the price for the
practice" and felt it was a good deal for the right
person. Three months after he listed he sold at full
asking price to a disaffected Canadian physician who
had moved to the Houston, Texas area seven years before
and now wanted to return.
He was originally from Hamilton
and liked the idea of working in one of the most elegant
areas of Canada. He flew up in March to view the property.
The clincher was that the top floor and attic had been
used for storage and could be converted to cosy living
quarters. The buyer had been divorced some years before
and had recently remarried. He and his new wife were
excited about the possibility of using the townhouse
for both work and as a place to live.
The fact that building, fully functioning
practice and home came in at under $1.3 million US made
it seem a deal to the buyer. The sale closed in a month.
The new physician plans to take over in December.
|
